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Both are synonym
Quick ratio is a measure of short term solvency of a business. It is said to be an improved version of current ratio in many aspects. A quick ratio of1:1 is considered good because the assets included in the calculation of quick ratio are cream assets easily converted into cash without shrinkage in value.
Quick ratio, a measure of liquidity of a business, is useful not only to the internal finance managers but equally useful to creditors, lenders, banks, investors etc. Normally current ratio is widely used for bank finance but for businesses with liquidity crunch, banks may consider giving more importance to quick ratio. It is a ratio developed to take care of the defects in Current Ratio. In other words, we can also say that it is an extended version of Current Ratio. Both these ratios deal with the liquidity position of a business. Quick ratio, which is better known as Acid Test Ratio, is a stringent or tough test of liquidity as compared to Current Ratio.
How to calculate Quick Ratio using its Formula?
Calculating quick ratio is a cake walk if Current Ratio is already calculated. It is a ratio between quick current assets and quick current liabilities. Quick current assets are defined as current assets less the value of inventory and prepaid expenses and quick current liabilities are defined as current liabilities less Bank Overdraft and Cash Credit.
Quick Ratio Formula:
Formula for quick ratio can be presented in two forms:
Quick / AcidTest Ratio
=
Quick Current Assets /Current Liabilities less Bank Over Draft and Cash Credit
Quick Current Assets =Current Assets less Inventory and Prepaid Expenses
Quick Current Liabilities =Current Liabilities less Bank Overdraft and Cash Credit
Thank you for your answer Mr. VENKITARAMAN KRISHNA MOORTHY VRINDAVAN totally agree with you
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